SolveYourProblem
Foreclosure Article Series
How Does A Mortgage Foreclosure Work?
The process of mortgage foreclosure has a
set procedure which depends on the laws of the state or jurisdiction
that you live in. These laws do vary a little bit from
state to state. However, most of them follow a certain process that
you will see below.
In case you do not already know, foreclosure is what happens
when a person cannot pay their mortgage or other home loan.
In the loan agreement, the bank always has the right to take
possession of the house if the loan is not paid. Then they
will sell it to make back the money that is owed to them. Because
they have the house as security for the loan, they can offer
lower interest rates on a mortgage than on an unsecured loan.
As
soon as a person misses even one mortgage payment, the
bank will be aware of it and they will begin the very early
stages of the process. In the beginning, they will try to work
with the home owner to get the missed payment or payments paid.
The first letter in this process may arrive as soon as 2 weeks
after the first missed payment was due.
After a person has missed
payments for three months or more,
the bank will have a lawyer file a Notice Of Default (NOD)
at the County Recorder's office. This is the official notice
to the person that they are facing foreclosure proceedings
and will lose their home if matters are not put right. Some
lenders file this immediately at the minimum 90 days. Others
wait longer, sometimes up to a year.
If the debt is not settled or payments agreed to the satisfaction
of the lender within 90 days of the Notice Of Default, then
a second notice giving a date for the sale will be sent. The
sale is usually 15 to 30 days from the date of this second
notice.
The sale
notice will be filed with the County Recorder, posted
on the property and published in the local newspapers. The
sale is usually by auction in a Trustee Sale.
The sale itself is normally held on the steps of the courthouse
in the county where the house is located. The auction will
be held and the winning bidder must pay in cash. Usually, they
pay a deposit right there at the auction and then the rest
is due within 24 hours.
The starting price is set by the lender and usually it will
be the total amount of the debt including all the interest
that is due and the legal fees from the foreclosure process.
So in some cases the price starts low and there may be a lot
of bidders. In other cases if the price is high there may be
nobody bidding. In this case the lawyers will usually take
the property.
So there is a set procedure that is followed in each state
and it is always possible to get an explanation of it from
a lender. It should not be hard to understand. Foreclosure
is a long drawn out process and most banks prefer to work with
a home owner to get a payment plan set up if possible. Mortgage
foreclosure is a last step that both sides usually want to
avoid if they can. # # # # #
SolveYourProblem.com
: 2008
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